Yields consolidate Fed Minutes-led gains at nine-month top, S&P 500 Futures rise 0.15%

• US Treasury yields retreat after rising to multi-day top on FOMC Minutes, S&P 500 Futures bounce off two-week low.
• Fed Minutes, ADP data propelled odds of rate hikes, stimulus hopes defend equity bulls.
• US ISM Services PMI will be watched for final hints of Friday’s NFP.

Market sentiment improved a bit during early Thursday, after the US Federal Open Market Committee (FOMC) Meeting Minutes triggered volatility in favor of the US Treasury yields during late Wednesday.

That said, the US 10-year Treasury yields jumped to the highest level since April 2021 by the end of Wednesday’s North American session, up 3.4 basis points (bps) to 1.70%, which in turn drowned the Wall Street benchmark. Though, the recently weaker US bond yields, down 1.5 basis points to 1.688% allowed S&P 500 Futures to print mild gains around 4,700.

Fed policymakers discussed faster rate-hike and plans for balance-sheet normalization during the latest FOMC, signaled by the Minutes. Given the strong US ADP Employment Change for December, 804K versus 400K expected, statements from the Fed Minutes like, “conditions for a rate hike could be met relatively soon if the recent pace of labor market improvements continues” also propelled the US bond coupons.

As a result, the Fed interest rate futures pointed at the 80% chance of a hike in March 2022 after the Fed minutes.

Elsewhere, China’s Evergrande and geopolitical tension surrounding Russia, Ukraine and Kazakhstan also favored yields.

Recently, Chinese policymakers showed readiness for further easing while Evergrande fears remain on the table and the economy battles covid. Even so, China China’s Caixin Services PMI rose past 52.1 figures flashed in November to 53.3 for December.

Considering the latest developments that favor US bond sellers, fueling the yields in turn, the markets are likely to pro-USD while trying to be cautious on commodities, as well as equities. However, it all depends upon Friday’s US jobs report for December.

Read: US December Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises